Following the failure of e-levy to deliver as projected by government, Ghana Revenue Authority (GRA) has resorted to another strategy in the e-levy implemented, which is being widely described by stakeholders as ‘absurd’.
E-levy was expected to have generated GHS600 million to date, but so far it has generated an abysmal GHS60 million.
Because the e-levy itself has failed woefully, the new strategy is to leverage it as a tax compliant tool to compel merchants who have not registered with the GRA for VAT and Income Tax to do so or else their customers will be made to pay e-levy for every transaction.
This is in line with the earlier communication on e-levy exemptions, where the GRA stated in answer to one of the frequently asked questions about e-levy that “Transfers made through an electronic payment service (mobile money, bank application, FinTech platform, etc.) to a commercial establishment which is registered with the Ghana Revenue Authority for the purposes of Income Tax or Value Added Tax are excluded.”
To implement this new strategy, GRA has directed charging entities like banks, telcos and Fintechs to submit the list of merchants who use their Point of Sale (POS) devices and platforms, so that GRA can figure out which of them are registered for VAT and Income Tax and which ones are not.
With that list in hand, GRA is now compelling the respective charging entities to configure the POS devices and platforms such that customers of merchants who are not registered for VAT and Income Tax will be charged e-levy when they make electronic payments to those merchants.
What this means is that if your favourite shop, restaurant, fuel station, food joint, online store etc is not registered to pay VAT and Income Tax to GRA, anytime you buy from them and pay with mobile money, bank card or any digital wallet via their POS device or digital/online platform, you will be charged e-levy.
The intent is to make that tax-evading merchants unpopular so that customers will stop patronizing them until the merchants go to GRA and register to pay taxes.
An official of the GRA actually confirmed this to Techgh24 saying that “Customers have a choice in who to buy from and the e-levy is being used as a tax compliance tool. We’re expecting merchants who want to be competitive to register or regularise their tax status with us. The exemption using merchants in good standing gives the customer a choice.”
According to the official, other tax compliance strategies are still being implemented but GRA felt the need to also leverage the e-levy for the purpose.
The official argued further that with this new strategy, GRA is confident that “even though E-levy collection may be low, VAT and Income taxes will rise.”
Absurd
But some fintech and bank executives have said that the move by GRA is “absurd” because it punishes innocent customers, threatens to promote cash use and to eventually derail the cashless economy drive.
“How can you charge innocent customers e-levy just to compel a merchant to be tax compliant – what has the customer got to do with GRA’s dealings with that merchant – and what is the guarantee that customers will choose to buy from other merchants and not go to same merchant and use cash?” one industry executive quizzed.
Another executive recalled that this is similar to the “senseless assumption” GRA and government made about the e-levy prior to its implementation and failed to heed all the caution from stakeholders and the cry of the general public, which has led to the spectacular failure of the levy in the first place.
According to one banker, it is simply mind boggling that GRA has chosen to punish innocent customers in the uncertain hope of getting defaulting merchants to be tax compliant, adding “you would have thought government has learnt something from how people have chosen to avoid the e-levy but they don’t seem to have learnt their lessons.”
The banker also thinks this “senseless directive reflects laziness on the part of the GRA, because, instead of fashioning out proper strategies to drive tax compliance among merchants, they have chosen to punish innocent Ghanaians for it.”
Charging entities worried
The affected e-levy charging entities are very worried about the directive because it also threatens to make people revert to the use of cash for payments at merchant shops instead of making electronic payments, and that will affect their bottom line.
“Clearly, this is also o threat to the digitalization and cash-lite economy drive of the government,” another industry executive said.
But the GRA official argues that if the affected merchants registers with GRA and become tax complaint, the threat to the bottom line of charging entities and to the cash-lite economy drive will be eliminated, adding that “as at now only a few people pay Income Tax and are carrying the burden. We need to broaden the tax net.”
Some Fintech executives told Techgh24 that even some GRA officials have admitted in private that they know the directive is senseless but they are also taking orders from above so they can’t do anything about it.
Meanwhile, whereas one Fintech executive said they are currently in the process of reconfiguring their POS devices and platforms to reflect the directive, one other Fintech executive says GRA is not particularly strict on the directive yet.
